7/30/2014

The US raisin cartel

In the United States there is a law that controls the price of raisins to keep it high. This law was enacted in 1937 and has had very good results for some producers and packers of this product.

Raisins

Other producers suffer. They are trying to have the Supreme Court  declare the law unconstitutional . As for consumers, depending on the type of grape and the year,  they pay 10 to 50% more than European consumers pay for their home grown grapes.  

The price of grapes depends on quality and where they are grown. The grapes for premium wines are worth more than the grapes  used to make raisins. U.S. law regulates the market for raisins. But in areas where farmers receive higher prices for raisins thanks to this old law,  they will plant more lower quality grapevines unfit for wine.  

I think it must have an impact on the price of grapes in general. If not, I don´t  understand how it´s possible to see the price differential between the US and Spain.  This is more so  when we consider that in America there is a lot of land, the price of fuel and water are lower than in Spain, and on top they use cheap  immigrant labor which  they exploit illegally  without mercy.

I was reading an old issue of The Economist magazine which  has an article on this topic. I buy this magazine from time to time but don´t  recommend it because the owners are neocons,  people like Aznar, Blair, Bush and the Canadian Harper. Sometimes I get so mad at their contents I put the magazine away, then pull it out a year later after I calm down.  

So, the article describes a case before the U.S. Supreme Court, where Marvin D. Horne and other farmers  asked the Supreme Court to order the Department of Agriculture to leave them alone and stop insisting they must pay the government now for grapes the farmers grew, which  the law demands they should have delivered to the government for free in 2003.

You see, the raisin price control law created  a commission made up  of 47 farmers and one consumer. This committee decides each year the amount of grapes that the government will expropriate from individual farmers. The commission  takes this share of the harvest, sells part of it wholesale,  in some cases it  gives the grapes  away, and sometimes they export the grapes so they don´t impact the US market. After the government  sells its share of the harvest, it pays the farmers some of the proceeds.

Horne the  rebel

In 2003 they said they were going to expropriate 43% of the harvest. This angered a group of farmers in California led by Mr. Horne. They began selling their harvest  without sending the government the 43 % share it had demanded. The USDA responded and sent the farmers a bill, asking them to pay the government its 43 % share of what they earned. So the legal battle ensued as farmers resisted, and the case has been around in the judicial system ever  since.

The case  has  reached the Supreme Court, which decides whether the U.S. government has the power to force these farmers  to hand over a large share  of their  harvest, and then wait to see if the government  commission pays them something.

I think the law is silly. First because it forces the farmer to deliver part of the crop without knowing how much he will eventually receive. Second because it increases the price of grapes to the consumer. Third, it increases the price of  grapes used to make wine. And this means that  U.S. wine costs more than in Spain. I think this  is good for the Spanish  wine industry, because  the overpriced grapes make America  a weaker competitor in the international market.

The law doesn´t  benefit all farmers. If it did, Marvin D. Horner and his colleagues wouldn´t have continued litigation for ten years to eventually reach the Supreme Court. They must be very upset with this goddam  system, and they  have fought their case to  the bitter  end.

Who benefits from this law? My guess:  big farmers who are commission members. And companies which package  and market raisins. I can´t imagine who else benefits if the market is choked in order  to raise consumer  prices.

This case is going to take a lot more time. The Supreme Court will rule, then it has to go back to the lower Federal Courts to work out the details. 

What remedy is left to Mr. Horne and his friends if they don´t  win their battle? They will have to convince Congress to change the law. And as the two  reigning U.S. parties are always fighting and spewing nonsense, I don´t  think this would  go far. We'll see what the Supreme Court says, and meanwhile keep drinking  Spanish wine,  it´s  better than California wine  and costs less because grapes are a lot cheaper in Spain. 

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The latest I read about this case says the Supreme Court ruled in favour of Mr Horne and friends, and referred the case back to a lower Federal Court for a detailed decision on this matter:

http://jurist.org/paperchase/2013/06/supreme-court-rules-in-california-raisins-takings-case.php

Depending on what that court decides, the US public may see cheaper wines in a few years. Or maybe not. 

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